China's growth model is broken, and it can't be fixed by cash injections or other emergency policy measures

China's economy has been slowing for more than a year now. The government has tried to guide it through the difficult transition of being an economy based on investment to one based on domestic consumption.

This naturally meant that the economy slowed during the awkward period when exports and investment capital shrank and consumption rose. President Xi Jinping called it "The New Normal" and warned politicians against calling for growth measures to get the economy going again.

The government also encouraged the Chinese people to enter the stock market as it restructured bloated, state-owned enterprises and took other measures to liberalize the economy.

But then the market crashed.

"The ideal situation would be several years of a steady bull market to cover the restructuring phase," wrote a Societe Generale analyst in a note last month. "Conversely, the worst-case scenario would be a stock-market crash before restructuring has even begun."

And that's what we're seeing right now. China's key economic indicators are flashing red. The old drivers of growth are shrinking faster than anyone expected, which is why the yuan was devalued to spur export growth.

"In our view, China’s structural growth deceleration is only half-way through and under the weight of debt and excess capacity, weakening investment demand will remain the main culprit," Societe Generale's Wei Yao said in a note this weekend.